The Las Vegas Business Press ran an article today by Valerie Miller entitled “www.catchusifyoucan.com” (link here) on the current state and future trends of “cybersquatting” litigation.
The article notes that, as common domain names become less available, there are a growing number of companies registering domain names containing common misspellings of other well-known domains (so-called “typosquatting”). [See related blog post here].
More noteworthy, however, is what these domain owners are putting up on those pages. Gone are the days where such domain names would lead to an adult website or occasionally even a direct competitor. The trend these days (what the article describes as the next big thing in domain name disputes) is for such sites to host multiple “click-through” links from which such domains then derive revenue for every click.
Not just limited to typosquatting, many companies are in the business of registering domain names incorporating all or part of a well-known trademark (or common misspelling thereof) and then hosting these “web directories” in hopes that enough web visitors will click on the directory links provided that the revenue earned at least pays for the domain registration. The profit margins may be slim, but with the right volume, a very profitable business emerges.
As the article notes, one developing issue is whether hosting such “directories” constitutes commercial use for purposes of causes of action for cybersquatting, trademark infringement, or unfair competition. The article specifically mentions one lawsuit brought by 3700 Associates, LLC, the developer of The Cosmopolitan Resort & Casino, against Softech Ltd., a Cayman Islands company which owns the domain name “cosmopolitanlv.com.” See 3700 Associates, LLC v. Softech, Ltd., Case No. 07-CV-01600 (D. Nev. Nov. 30, 2007). [Click here for prior post on one of the first cybersquatting lawsuits filed by 3700 Associates in Nevada which was dismissed for lack of jurisdiction, but subsequently refiled in Florida]. In the case against Softech, some of the click-through links allegedly generated by visiting cosmopolitanlv.com lead to competing Las Vegas condominium projects or competing Las Vegas hotels such as Mandalay Bay – effectively using 3700 Associates’ trademarks to divert web surfers to competing businesses.
One nuance that the article does not explore is an important aspect of the current domain name registration system that has allowed this business model of hosting click-through links to thrive and prosper – Domain Name Tasting. The problem was noted recently by the World Intellectual Property Organization (WIPO) in its recent report entitled “DNS Developments Feed Growing Cybersquatting Concerns.” (HT: Marty Schwimmer). The report, which notes the unprecedented number of cybersquatting complaints filed in 2007 (2,156 complaints were filed with the WIPO’s mediation center -- an 18% increase over 2006 and a 48% increase over 2005), also highlights the growing concern that trademark owners have over the trend of Domain Name Tasting:
The practice of registering domain names during a five-day registration fee grace period for pay-per-click revenue remained a significant concern for rights owners in 2007. Frequently involving trademarks, the often automated practice of “tasting” effectively prevents rights holders from assembling reliable and timely information that would enable the filing of a UDRP complaint, leading them in some instances to resort to court litigation, especially in the USA.
While the concerns noted in the report are more focused on the ability of trademark owners to file UDRP complaints against alleged cybersquatters, the very fact that domain name registrars have a five day grace period on domain name registrations has enabled such companies to “taste” for free whether a website hosting click-through links will generate sufficient traffic and click-through revenue to pay for itself. Those sites not likely to be profitable are simply deleted and the registrar receives a credit. Fortunately, ICAAN recently announced its intent to take action with this year’s budget to end the five day grace period and begin charging registrars the annual ICAAN fee for each domain. But since the annual fee is still only 20 cents per domain, the issue of businesses registering multiple domains and hosting directories of click-through links will not go away.
One would hope that as more web surfers become more internet savvy, the proliferation of these directory sites would diminish. After all, these directory web sites only make money because people click on the links that are generated. If people, upon realizing that they are not on the site that they expected, would simply retype the domain name again or bring up a well-recognized search engine (like www.google.cm), then the domain name owners would eventually not be able to derive enough click-through revenue to make it profitable for them to keep such vast inventories of domain names.